An investigation on trade relations between Turkey and Gulf countries - Gravity model approach

When you take into consideration the distribution of the import and export market of Turkey within the regional context, it is observed that there has been a change in the distribution of the share in the total import-export particularly since the Justice and Development Party (AK Party / AKP) came to power in 2002. Although the European Union (EU) still has the largest share in Turkey's total foreign trade, a downward trend in the share of EU can be observed during this period. While it can be seen that there is an increasing trend in the share of Western Asia and other economic trade zones. At this stage, we can observed that it tends to increase to this point naturally. In terms of differentiation or rate of change in Turkey's foreign trade indicates this conversion. One of the main issues that has been questioned is the relation between Turkey and the non-European regions in this context. The increase in trade between Turkey and the Gulf states and have they been focused on the prominant cause or what is the causes. And the solution to this problem has been attempted to be answered by taking support from the gravity model. The Gulf States, which contains a significant portion of the economic size of the region described as Middle East/Western Asia, have a significant impact in OPEC and international oil production and pricing. With respects to Iran, particularly in the political sense, their regional power feature and in variables such as the economic size and the capita per income is demonstrating a similar apparence to Turkey and also has significant oil and gas reserves and production. Iraq, despite being one of the leading countries with oil reserves in the world, has the lowest economic indicators in terms compared to countries like; Iran and Saudi Arabia because of the de facto division and confusion among themselves. The remaining countries, along with Saudi Arabia, are members of the Arab Gulf Cooperation Council countries and are countries relatively rich in terms of economic indicators. When compared in terms of per capita national income, per capita income in the six countries, Iran and Iraq are higher than Turkey. Qatar especially, is one of the few countries with the highest income in the world in national income per capita. The Gulf countries are becoming more and and more important in Turkey's trade composition. It can be seen a large increase in the actual volume of trade with the aforementioned countries as shown by the rich statistical tables in the study. This increase applies to all countries under study, albeit in different proportions and sizes are available. It is witnessed in the world economy an increase in size of so-called peryphery economies which are economies mostly non-OECD countries during the 1999-2013 years period. In this period, OECD countries grew by less than twice, albeit the overall world economy grew nearly two and a half times, with non-OECD developing and rich countries have grown from three to five times. This naturally makes a conclusion that the developing and non-OECD rich countries are expected to affect trade with the world without any classification of OECD and non-OECD. In recent years Turkey's trade has been claimed to have a significant level of trade growth in general with the Middle East / West Asia and the Gulf countries in special. Whether Turkey has truly been increasing in volüme to foreign trade is discussed in relation to the previous paragraph taken up with world economic growth perspective. Again within the study, it is examined that what the factors are influential in commerce of Turkey and how this affects Turkey's foreign trade which allegedly started to change its structure with specified countries within the scope of the study such as Iraq, Iran, Kuwait, Saudi Arabia, Bahrain, Qatar, the United Arab Emirates and Oman. When doing this, it can not even be measured economically with some economic datas. However, the number of variables are considered by the benefits from the gravity model. Econometric equations and process-oriented studies were not tested during the writing process. By collecting the necessary informations for foreign trade indicators which are based on the general data about the world economy to attempt to explain the general economic data, the composition of the foreign trade between Turkey and the said Gulf states have been tried to be shown. Also, certain informations with quantitative data and/or claims/claim were tried to be verified or falsified. Using the quantitative data in the modeling context, Panel Data Analysis method has been applied, and it has been attempted to explain how the results were reached together with the integrity of the work on the results. It's been taken into account changes and dynamics in the general sense of the world and specific meaning of the region regarding Turkey's trade composition with Gulf countries. Aforementioned method is used for the analysis of the empirical data which were obtained by evaluating gravity model and was benefited as indicated by it. Within the scope of Gravity Model, , the exporting country, the partner country "real GDP" and "cross-country distance" are used as main variables. In this way, what the gravity model argued that countries' foreign trade is proportional with their Gross Domestic Product (GDP), and inversely proportional to the distance between them has been tested for Turkey whether it is valid in terms of Gulf countries or not. Also, as described below, there have also been a number of other variables and dummies. It has, firstly by taking three basic trade theory known in literature, been tried to get a point of view about the study by discussing Turkey's foreign trade with the said countries. For every one theory, it has been attempted to explain how to apply the theories on the aforementioned countries in the result of the thesis. In the early 1980s, it's seened economic liberalizated over the world which increased international trade, imports and exports ratio to GDP ratio also showed an upward trend which showed itself more clearly in 1990s. It is also given some basic informations about the world economy in this study using time periods starting from 1999 until 2013 to strenghten the power of the analysis. The world GDP is seen to increase less than 2.5 times from 1999 until 2013. When the terms of Turkey and the Gulf countries, the change in GDP volume and value in the range of years listed by the countries have grown in greater proportions significantly. The same situation is also observed in the growth rate of the GDP according to purchasing power parity. In terms of imports and exports, the rate of increase of imports and exports has increased proportional to the world GDP growth rate and also when looked at exports and imports ratio to GDP ratio, it has increased by approximately 7% from 1999 to 2013 . This veryfies the thesis that countries's economic relations and interdependency have continuously increased. In addition, world imports and exports increased at a greater value than each unit of increase in the world GDP. Within the context of the study, when it is looked at the trade value between the Gulf countries and Turkey, it has reached the same point. As it can be seen from that of the application of Gravity Model, Gulf states and Turkey, in case of a unit increase in their GDP, their foreign trade volume which they realized was found to be higher than one unit. The annual rate of the world imports and exports, except for the years 2001 and 2009 which is clearly seen the impact of the crisis, have increased at a significant rate in general. As a matter of fact, there was a worldwide import and export growth rate of 0.7% in 2001, that is, almost stopped growth rate. In 2009 however, an approximate rate of world imports and exports showed a decline rate of around 11%. This means that the world trade volume in 2009 declined at a rate close to 11%. Looking at the increase or decrease of imports and exports between Turkey and the Gulf Countries, although these rates differ from country to country, generally, there is a proportion between the growth rates of Turkey's and the Gulf States' import and export. The increase of world imports and exports, and trade between Turkey and the Gulf States can be affected directly from the developments which occur in the world economy. Thus, in 2001 and 2009, is clearly visible in the trade figures between Turkey and the Gulf States. It is such as to prove that the results of the Gravity Model applied to the countries covered by the scope of study. So, the areas all said countris share are, common religion, a common membership of international organizations (IIT) and variables such as common borders, in fact, as alleged in many studies, has been applied to the model under study with Turkey. It's seen that they are not very important factors, and factors affecting actual trade among the countries' imports and exports, namely shows that the increase in total foreign trade volüme in parallel with the growth of the GDP of the country. The rate of decrease of the European Union in Turkey's foreign trade composition should not be evaluated as a weakening of economic relations of Turkey and European Union Countries. It would be more correctly interpretation by look at the countries called the periphery, countries outside of Europe and OECD, have growing further and it would be more appropriate to make an assessment as to increase their share in international trade. Therefore, it will be more accurate to evaluate the increase in trade relations between Turkey and the Gulf States with respect to the said countries and Turkey's economic size and economic development along, according to the results from the study. International economic relations can be affected by many factors. While trade volumes with each of the countries during the Cold War period had relatively low value and proportion, it has, recently, been shown to change. Especially, when it is considered that the regions remain very low level of foreign trade, such as Africa, these changes are seen more clearly. This comparison can provide more robust results between the EU and Africa prior to the Gulf countries. In this case, Turkey's trade volume growth occurred in Africa in 2013, will be several times more than in the EU. The same conclusion is valid for a certain degree of Gulf States. In particular, the volume of trade with regions outside of Europe during the 2000s has been observed increased more than in Europe. The same situation can be observed from the experience in the world. After the overthrow of Saddam Hussein in 2003, Iraq has been one of the main Gulf States for Turkey's export. Particularly, in recent years, it has become one of Turkey's top exporting countries within the first five countries. In terms of Turkey's imports, being lower than the export figures it can be observed the superiority of Turkey's position in terms of significant value in foreign trade against Iraq. Iran, from 1999 to 2013, both in terms of the value of imports and exports, had been on an upward trend referred to in the range of years, and it has been observed that the total trade volume increased more than 15 times. From 2002 until 2013, Turkey's most foreign trade volume has realized with Iran is seen as important when considering political tensions. Turkey's trade volume with Saudi Arabia and the United Arab Emirates (UAE) is higher than any other Gulf Cooperation Council member countries. In 2012-2013, the UAE has had the highest volume of foreign trade with Turkey together with Iraq and Iran. For the reason that the other four Gulf states (Kuwait, Qatar, Oman and Bahrain) are relatively smaller economies, Turkey's trade volume with these countries has been low. Again, when these countries compared their trade with Turkey, trade taking place with Kuwait and Qatar according to Bahrain and Oman is at higher levels. When viewed in Kuwait and Qatar's economic size, it can be expressed that they have relatively larger economic size than Oman and Bahrain. Since it also received the same result from the application of the gravity model, this inference follows a consistent pattern. One important point in terms of product range, Turkey's imports exceeding number of pens in the million dollars or higher from the Gulf countries outside Iran and the UAE, are very little or still are a high value of each item. This could be due from arise in the Gulf States turn to products based on only the oil sector. Bahrain, Iran and the UAE also to come forward in different sectors in their composition of foreign trade with Turkey, but in terms of their exports to Turkey are not seem to show up. When handling the total, although Turkey's foreign trade achieved a surplus against the Gulf countries, without exception, every year within the scope of the study during 1999-2013, has given the foreign trade deficit against Iran, and has achieved foreign trade surplus every year without exception against Oman during in the time period between 1999-2013. Turkey's trade with other countries could vary from year to year in case of the trade deficit or surplus. The most significant variable in the study, which has a meaningful effect to Turkey's foreign trade volume tested by using panel data, has been the growth of their respective countries' GDP over time. Accordingly, GDP of a country is the only variable significantly affecting the increase in a country's trade with Turkey. The positive or negative effects of other variables have not been significant. Trying to explain the reasons for this leads to how foreign economic actually is relations to the homo-economicus logic. Recently, the increase of trade volume with the different regions should be explained by the total economic size of the countries as already mentioned. Indeed, Turkey's African concept in relations with the African continent is used as a whole without distinction of any other term such as Muslim or non-Muslim states or communities. The rise of the religious factor in relations with the countries of the Gulf and the Middle East/Western Asia is associated with the fact that the foreign policy argument rather than a religious one. The main reason why Islam is used in Western Asia is related with the geography itself. The geography is the first spread of Islam in the historical sense of the present geography, and is also related with being overwhelmingly Muslim population. Another point should be considered that the term or speaking of Islam should not be understood as a single structure. Although the religious factor under study should have been undertaken according to the majority Muslim population categories, as well as different religions and sectarian differences also accommodates itself again in the Islamic societies. Thus, the religious factor is not actually a trade determinant and the same is also valid for Organization of Islamic Cooperation. Member states of the Organization of Islamic Cooperation are generally considered developing countries or non-OECD rich countries. Therefore, many studies which are explaining the significant effect of the Organisation of Islamic Cooperation may vary with the question of which countries are in comparision. That is, for example, when it comes for the comparision of a member of the Organization of Islamic Cooperation among African countries and an African country not a member of the Organization of Islamic Cooperation, will there be a same result? Each of these types of questions should be considered as separate issues that require a seperate study. Given the distance variable, The relationship which the gravity model suggests that the distance between countries and their trade volume projections should be negative is not valid. In this regard, what needs to be highlighted principally is which countries are being compared with each other. Herefore, the distance variable is not significant is related whether the structure of the countries under study or Turkey's entry into trade relationship with the close environment is also a sturdy case to be examined. Common borders are meaningless as a variable, and even goes negative impact of Turkey's relations with neighbors is not surprising when considering the current political uncertainty. For, when it is considered countries such as Syria, Iran and Armenia, and countries with political tensions, it can, as a matter of course, be met lack of positive impact of foreign trade volume in the common border variable. The same situation should be seen in the same region variable gives a kind of supportive results to the common border variable. The Middle East, the Balkans and the Caucasus tensions and Turkey's problems experienced by countries in the region, make a negative contribution to its foreign trade even when compared with the countries in the study, albeit insignificant negative effect is understandable. Considering the countries covered by the study, which are relatively prosperous and stable Gulf countries, also make a positive impact, although not significant forms of co-regime has been an understandable considering the consequences. Indeed, Iraq and Iran, are relatively more vulnerable and fragile economy by comparison with other Gulf countries. On the contrary, viewing the six Gulf Cooperation Council members countries, although not common form of government with Turkey, due to the strong economy and from having politically good relations with Turkey, it keeps out them being disadvantages for the reason not having a common regime. Taken together, it was observed that all datas and applications discussed during the study variables except GDP variable, as applied to the countries examined in this study could not have a significant effect on foreign trade. One of the main results obtained from the study, in an inference to be made with the gravity model variables taken into consideration, affecting foreign trade volume according to geography or country factors, can also be changed. Therefore, using the gravity model to determine the factors that determine the volume of foreign trade in a certain way is not easy. For that reason, an extraction may be more accurately determined by using what factors, which countries and which variables. It would be correct to note: it is required to know that how are the relations between the countries; such as political tension, and how the effects of variables such as the advent of the geographical and cultural conditions can change every time for the time of applying Gravity Model. For example, as a result of the work given sample, when Turkey's 2005-2010 period compared with the 2010-2015 period, when an inspection performed on the boundary variables, are likely to emerge very different form of relationship. This is why distance and land borders, such variables are not significantly associated with the shape of each period, ceteris-paribus where everything is considered more likely to be accepted. In support of this argument, given in the 1999-2003 study period and post-2003 period are striking examples of Turkey's trade relations with Iraq. For example, if it continued Saddam Hussein's Presidency after 2003, how would be the sense of distance or land borders variable? Therefore, GDP is likely to have a significant effect almost all studies in general as a major variable. The most important study conclusion which should be mentioned as the last sentence is that Turkey's trade relations with a particular world region (Europe-OECD countries) has not been weakened and its trade relations with a specific region of the West Asia / Gulf States have not been supremely improved. The most important reason is that, as it seen in the present study, the GDP of the states referred as Periphery have been grown further than the GDP of the Center's countries, that expressed the significance of the relationship inside the Gravity Model.